1) Accounting is also called the language of business. a) True b) False 2) Accounting includes identification, recording but not communicating reports. a) True b) False 3) Which among the following is NOT an external user of financial statements? a) Lenders b) Shareholders c) Regulators d) Suppliers e) Production manager f) Customers 4) Financial accounting relates to needs of external decision-makers while management accounting deals with needs of internal decision-makers. a) True b) False 5) Which is an asset? a) Trade payables b) Accrued expenses c) Prepaid expenses d) Unearned revenues 6) Liabilities are also called debts, financial obligations, payables. a) True b) False 7) Current assets do NOT include: a) Building b) Cash c) Inventories d) Supplies e) Trade receivables 8) The value of land and equipment depreciate over time. a) True b) False 9) The accounting equation is Assets = Liabilities - Equity. a) True b) False 10) Assets taken away from the company by the owner for his personal use is referred to as investment. a) True b) False 11) The cost of doing business is referred to as expenses. a) True b) False 12) Revenues increase equity. a) True b) False 13) Expenses increase equity. a) True b) False 14) Assets: BD167 800 Equity: BD91 300 Liabilities: _________ a) BD 259 100 b) BD 76 000 c) BD 67 500 d) BD 76 500 15) Liabilities: BD 37 900 Equity: BD (15 000) Assets: ________ a) BD 52 900 b) BD 30 000 c) BD 22 900 d) cannot be determined 16) When owner invests in the business, both assets and equity increase. a) True b) False 17) The purchases of supplies for cash increases liabilities. a) True b) False 18) Cold stores and car showrooms are examples of merchandising business. a) True b) False 19) Collection from customers for a previous transaction results to an increase in assets and an increase in equity. a) True b) False 20) The payment of liabilities will cause total assets to decrease. a) True b) False 21) Ahmed withdrew cash from his restaurant business. What will be the effect of this transaction on the accounting equation?  a) A +, L +, E - b) A -, L -, E - c) A- , L no effect, E - d) A -, L no effect, E no effect e) cannot be determined 22) Which of the following is NOT a non-current liability? a) Bonds payable b) Mortgage payable c) Long-term notes payable d) Salaries/Wages payable e) Long-term borrowing 23) This concept means that the business is separate from the owner or owners and therefore, all transactions with him/them are to be recorded. a) Business entity concept b) Full disclosure c) Cost principle d) Monetary unit e) Expense recognition 24) When the business provides services to customers on account or on credit, what will be the effect on the accounting equation? a) None, because customers did not yet pay b) A +, L +, E + c) A -, L +, E + d) A + , L no effect, E + e) A -, L -, E - f) cannot be determined 25) Inventory, Buildings, Receivables are classified as _____. a) Equity b) Liabilities c) Assets d) Revenues e) Expenses 26) Deposits in transit are added to the bank balance for purposes of the bank reconciliation. a) False b) True 27) The third closing entry is to close the net income or net loss to the capital account. a) True b) False 28) Bank service charges are deducted from the book balance in the bank reconciliation statement. a) True b) False 29) Depreciation is part of which section of the Statement of Cash Flows? a) Operating b) Investing c) Financing d) None of these 30) The gain or loss on sale of equipment is shown in which section of the Statement of Cash Flows? a) Operating b) Investing c) Financing d) None of these 31) Withdrawals and investment of the owner are shown in which section of the Statement of Cash Flows? a) Operating b) Investing c) Financing d) None of these 32) Closing entries reduce the balances of all temporary accounts like expenses and revenues, to zero. a) True b) False

Activity 1: Intro review

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